Paul Ryan: Here's How We Can End This Stalemate

Both Reagan and Clinton negotiated debt-ceiling deals with their opponents. We're ready to negotiate.

The president is giving Congress the silent treatment. He's refusing to talk, even though the federal government is about to hit the debt ceiling. That's a shame—because this doesn't have to be another crisis. It could be a breakthrough. We have an opportunity here to pay down the national debt and jump-start the economy, if we start talking, and talking specifics, now. To break the deadlock, both sides should agree to common-sense reforms of the country's entitlement programs and tax code.

ENLARGE

President Obama's news conference Tuesday came on the eighth day of the government shutdown.
Alex Wong/Getty Images

First, let's clear something up. The president says he "will not negotiate" on the debt ceiling. He claims that such negotiations would be unprecedented. But many presidents have negotiated on the debt ceiling—including him. In 1985, Ronald Reagan signed a debt-ceiling deal with congressional Democrats that set deficit caps. In 1997, Bill Clinton hammered out an agreement with congressional Republicans to raise the debt ceiling, reform Medicare and cut capital-gains taxes. Two years ago, Mr. Obama signed the Budget Control Act, which swapped spending cuts for a debt-ceiling hike.

So the president has negotiated before, and he can do so now. In 2011, Oregon's Democratic Sen. Ron Wyden and I offered ideas to reform Medicare. We had different perspectives, but we also had mutual trust. Neither of us had to betray his principles; all we had to do was put prudence ahead of pride.

If Mr. Obama decides to talk, he'll find that we actually agree on some things. For example, most of us agree that gradual, structural reforms are better than sudden, arbitrary cuts. For my Democratic colleagues, the discretionary spending levels in the Budget Control Act are a major concern. And the truth is, there's a better way to cut spending. We could provide relief from the discretionary spending levels in the Budget Control Act in exchange for structural reforms to entitlement programs.

These reforms are vital. Over the next 10 years, the Congressional Budget Office predicts discretionary spending—that is, everything except entitlement programs and debt payments—will grow by $202 billion, or roughly 17%. Meanwhile, mandatory spending—which mostly consists of funding for Medicare, Medicaid and Social Security—will grow by $1.6 trillion, or roughly 79%. The 2011 Budget Control Act largely ignored entitlement spending. But that is the nation's biggest challenge.

The two political parties have worked together on entitlements before. In 1982, Social Security's trustees warned Congress that the program would go bankrupt within a year. If it had, seniors would have seen an immediate cut in their benefits. Instead, Congress passed a package of reforms—the most important of which was an increase in the retirement age. Because Congress phased in this reform over time, there were no budget savings in the first five years. But through 2012, the savings were $100 billion. In the next 75 years, Social Security's actuaries expect that these reforms will save $4.6 trillion.

Just as a good investment gets higher returns through compound interest, structural reforms produce greater savings over time. Most important, they make the programs more secure. They protect them for current seniors and preserve them for the next generation. That's what the president and Congress should talk about.

Here are just a few ideas to get the conversation started. We could ask the better off to pay higher premiums for Medicare. We could reform Medigap plans to encourage efficiency and reduce costs. And we could ask federal employees to contribute more to their own retirement.

The president has embraced these ideas in budget proposals he has submitted to Congress. And in earlier talks with congressional Republicans, he has discussed combining Medicare's Part A and Part B, so the program will be less confusing for seniors. These ideas have the support of nonpartisan groups like the Bipartisan Policy Center and the Committee for a Responsible Federal Budget, and they would strengthen these critical programs. And all of them would help pay down the debt.

We should also enact pro-growth reforms that put people back to work—like opening up America's vast energy reserves to development. There is even some agreement on taxes across the aisle.

Rep. Dave Camp (R., Mich.) and Sen. Max Baucus (D., Mont.) have been working for more than a year now on a bipartisan plan to reform the tax code. They agree on the fundamental principles: Broaden the base, lower the rates and simplify the code. The president himself has argued for just such an approach to corporate taxes. So we should discuss how Congress can take up the Camp–Baucus plan when it's ready.

Reforms to entitlement programs and the tax code will spur economic growth—another goal that both parties share. The CBO says stable or declining levels of federal debt would help the economy. In addition, "federal interest payments would be smaller, policy makers would have greater leeway . . . to respond to any economic downturns . . . and the risk of a sudden fiscal crisis would be much smaller."

This isn't a grand bargain. For that, we need a complete rethinking of government's approach to helping the most vulnerable, and a complete rethinking of government's approach to health care. But right now, we need to find common ground. We need to open the federal government. We need to pay our bills today—and make sure we can pay our bills tomorrow. So let's negotiate an agreement to make modest reforms to entitlement programs and the tax code.

This is our moment to get a down payment on the debt and boost the economy. But we have to act now.

The Federal Reserve won't keep interest rates low forever. The demographic crunch will only get worse. So once interest rates rise, borrowing costs will spike. If we miss this moment, the debt will spiral out of control.

That's why I want a budget agreement—because if we don't make the tough decisions now, we'll face only tougher decisions later. We can work together. We can do some good. All it takes is leadership—and for the president to come to the table.

Mr. Ryan, a Republican, represents Wisconsin's first congressional district and is chairman of the House Budget Committee.

The Wall Street Journal’s October 8th article, “Paul Ryan: Here's How We Can End This Stalemate”, describes that there is still apparent perplexity in the negotiation of the United States’ budget deficit. It incorporates why the budget reforms are so vital.

The article reports that Reagan, Clinton and Obama have all negotiated on the debt- ceiling once before. There are so many different options to go about lowering the debt, but do we really want Obama to rush this process and cause another disaster? This problem has been going on for way too long, but in order for the government to succeed, they need to lay all the cards on the table and pick the best plan. Without doing so, it effects government sponsored projects such as education, healthcare and pensions. The government is taking funds from other government sponsored projects away.

The government's main focus is to figure out whom we’re allowed to “borrow” from and how much we’re allowed to borrow. Without the answers to those two questions, the government will continue to resort to raising the debt-ceiling, which will increase the budget deficit.

With a couple of hundred million adults in the US, I would guess we have at least several million "solutions" to the nation's problems.

Being realistic, however, how many people really understand enough about the matter to provide an intelligent and practical way out of what is an age-old dilemma?

Representative democracies are ruled by politicians who achieve success by promising to give generously to the people who elected them. As a result, they will always tend to spend more than they tax. In the case of the US, nine years out of every ten we borrow money. Go back to the end of World War II (when we borrowed a cartload that we have never paid back), and you will discover that the total surplus in the half century before Clinton finally got us in the black for a short time was about $35 billion -- $300 billion current value in our constantly depreciating currency. Ronald Reagan borrowed more each year for seven of his eight years in office.

So, when readers imagine that the solution is politicians collecting more in taxes than they give back in largesse, they are either academics or fools -- and perhaps I repeat myself.

Many GOP leaders want to stop funding for Obamacare, even if it would mean dangerously extending government shut down. President Obama is upset.

The original sin is that the different options of health care reform were never systematically publicly debated. Then, the current administration made a cardinal mistake, when using a brief narrow majority in the House, had the bill passed. In democracy, every major policy change needs meaningful bi-partisan support, as in the long run no policy can be implemented without that. And, this is exactly what is happening now.

I leave it to you to decide what is worse; using a short-term majority to pass a bill that is strongly opposed by the meaningful minority, or using a brief majority to stop this bill from implementation

Paul Ryan says : "This isn't a grand bargain. For that, we need a complete rethinking of government's approach to helping the most vulnerable, and a complete rethinking of government's approach to health care."

And I agree with him.

However, in the five years since the Affordable Care Act (ACA) was first drawn up as a bill, no Republican has given any specifics of how they propose to do this. We have heard a lot about tort reform and other things that would do little to reduce fast growing healthcare costs. But Republicans have been strangely silent about the massive market distortions driving rapidly rising healthcare costs in the private market.

Such things as : the import ban on pharmaceuticals that raises prescription drug costs in the USA far above other advanced nations; the imposed shortage of doctors that keeps doctors' earnings higher than they night be otherwise; the lack of transparent market prices for virtually all healthcare treatments and services resulting in no real consumer choice as a means of setting affordable market prices; the total lack of financial incentives for consumers to use their healthcare budgets wisely.

All these are private market driven cost factors that cry out for private free-market solutions. Why will Paul Ryan and fellow Republicans not come out and give us clear proposals in these areas?

Is it because very large vested interests in the private healthcare sector would not support them? But the same interests do provide much financial support to Republican politicians?

Instead, Paul Ryan and his Republican colleagues fall back on remedies based on cutting services to the elderly, the needy, the vulnerable - by limiting Medicare, Medicaid and the like.

I would not disagree that reforms such as means-testing Medicare - and Social Security - could make those programs financially more solvent and less burdensome long-term, without cutting assistance to the needy (perhaps even increasing that?). But even for that to be effective, there is a critical need for private healthcare market reforms.

If Republicans want to move forward with real integrity vis-a-vis the American people, they should propose these too. Even if that means having the courage to buck the big vested interests. After all, that would be a true "free market" solution. And isn't that supposed to be a key part of what being a Republican is all about?

It's not a "stalemate", Paul. It's crazy Republicans holding the entire country hostage by not increasing the debt ceiling. You can't govern this way. Get your party in order and then we can talk. I'm not even going to read your BS article until you stop screwing our country. Do your job. Pass a clean CR and raise the debt ceiling. Until then, stop wasting your time writing op-eds and go crack some Tea Party skulls.

The first step in a compromise on the budget is to try and determine how much the country can afford in taxes before the economy is negatively effected. You cannot continue to take money out of the economy to fund the government and wealth redistribution indefinitely. The US has generally had better growth and greater prosperity than some European countries because we take less from the economy in taxes. That relatively higher level of growth enables us to better fund government spending over the long term.

It is currently expected that current tax rates will result in a 19% of GDP going to taxes. It is possible that we could still fare well over the long term if that rate went to 20%. Please do not respond telling me about higher tax rates in the past (very few actually paid those rates) or that the economy has endured with higher taxes to GDP. The higher tax rates relative to GDP were for limited periods of time. Please accept that a tax take higher than 20% of GDP will have limiting effect on the economy. Moreover, increasing taxes 1% will not cover our current and future spending problems. We need a compromise that effectively raises taxes to some degree on everyone. In addition, we need to agree that our current and future spending is unaffordable. I am 59 and I would like to see my Social Security and Medicare effectively reduced. Why? Because it is not affordable. If citizens continue to take an attitude that you cannot reduce my Social Security and Medicare, a more substantial reduction will be required in the future. Why? Because financing our on-going debt will require us to do so.

People can argue about Obamacare all they want, but that does not mean it will change anything. By my reckoning it will add $100 Billion of unfunded liability annually. Republicans are also at fault for adding to the deficit with a Medicare Part D entitlement.

The way forward is to change taxes to foster growth and raise 1% more relative to GDP. But everyone must pay. For some that means their portion of income redistribution must be cut. For everyone else it means a marginal increase in taxes. The 2013 tax increase was largely focused on those with the most wealth. To be fair the next tax increase must involve everyone.

From there we know that other government programs will need to be reduced to be able to maintain core government services and entitlements over the long term. We need politicians to get started and stop pandering to the base on both sides.

The United States budget cannot keep spending more than it receives in revenue. How true! Therefore, revenue must increase and spending must decrease. SOLUTION: 1. Cut almost all subsidies and tax breaks for large corporations. 2. Streamline gov't spending, such as reducing the military. 3. Raise taxes on those of us who can afford to pay far more than the current tax rates, and the tax rates should be much more progressive. Hey, more revenue! Now, how difficult was that?

Biggest challenge that faces our country is not these obviously shrewd politicians but people who put them in office. Majority of voters are ignorant and do not see the big picture. You do not get to 17Tr in debt without the stupidity of the voting class. On top of that, the very same voters do not want to take the bitter medicine and want government to borrow more and more from China (just like they do on their credit cards). It is hard to blame either side pandering to such voters who are now the majority. That is what makes this a tough problem to fix. Until government is "free" for majority of population, there is no end in sight to this tragedy.

I've largely stayed out of commenting on this crisis up until now, but we're clearly standing on the edge of a void no one can see across.

Yet exits must be found, and swiftly. Regardless of your political party affiliation or lack thereof, I humbly beseech you to consider these points:

1. The ACA, while well-meant in terms of purpose, is an incredible disaster as a matter of law and practical policy. This must be faced by all politically-active people in this country, squarely and honestly.

The re-definition of "full-time employment" and its mandate that everybody, regardless of their true ability to pay, buy insurance is clearly a non-starter.

We've seen consistency in this under-reporting of underemployed persons and income erosion, which indicates that this is a politically-deadly topic... and it should be.

After many years of the Democratic mantras about the erosion of people's pay scales, Obama's inept handling of the economy coupled with the effects of ACA have greatly heightened this trend. The long-term demographic and macroeconomic results of this will be bleak indeed.

Moreover, the other big shoe hasn't dropped yet. What's going to happen with the ACA when vast numbers of people simply refuse to pay up, because they can't?

What happens when they start asking their employers to not withhold their earnings, because they know the IRS will just take it away, rather than just playing with it for a year and keeping the interest accrued? What happens when the IRS tries to collect, and finds out that these people have no assets worth selling to recoup the government's expenses on the IRS's investigations, let alone the back taxes accrued?

Are we going to arrest them all?

But nobody even bothers talking about this issue seriously, in either party; it's like a leper walking onto a Victoria's Secret photo shoot: so ugly that we are refusing to see it coming.

So, do we want a "war on tax-dodgers" to go along with our, ahem, "successful" War On Drugs programs?

2. The interest rates at the Fed are monetizing the debt away, but they're creating another disaster. The stock market is clearly at bubble levels unseen since 2007- if anything, it's worse, because there's so little fat left in the system.

3. Our government is lying to us all about real inflation. In order to have sane conversations about these issues, we need to be clear about this and demand changes in how inflation is calculated.+------------------------------------+In short, my fellow Americans, I feel that Paul Ryan's suggestions, while admirable in tone, are a trap.

Which of the above crisis areas is the tipping-point for the American economy is largely a pointless question at this point; if no lasting bargain is forged.

So, are there any solutions to this morass that might actually work, and would allow, nay, ~force~ the Parties to bargain in good faith about the very serious issues we face as a nation?

There is one tool left.

A balanced-budget amendment to the Constitution.

Congress won't like it, but finally, FINALLY, their hands will be tied- tied more tightly than the Sequester, tied tightly enough that, perhaps, they will recognize each others' basic humanity again, or at least engage in more realistic arguments.

The pain that will come with this is real, and the Union might not survive it, but the sooner this endless-crisis mode is finally ended by the will of the people, the sooner we can return to something like normalcy, instead of this world of ghostly promises and false money that we've allowed the fools in Washington to create for us, to our collective detriment and future ruin.

To all you cowards in Washington: you know that 80% of the government is on autopilot, and we borrow 32 cents on the dollar we spend. Either we raise taxes or Social Security Medicare and Medicaid WILL HAVE TO BE CUT! Pussyfooting around the subject and blaming the poor (usually minority) doesn't help the situation. In fact every American is a taker under OUR system.

Rep Ryan: The USSR failed under both escalation of US military capability, AND, most importantly, a resurgent US economy, powered by people unleashed from ill-advised meddling / allowed to benefit from their private enterprise. The same country was langusihing just a few years before. Proper and responsible policy is a duty of statesmanship. It is foreign to opportunistic politicians.

W\After this amazing victory, we risk defeating ourselves and forfeiting the unparalleled legacy of this country if we allow 'government' to replace self reliance, which leads to inordinate focus on 'spending' rather than earning.

Please hew to statesmanship. We still benefit from the healthier '80s. We are at a similar crossroads as the country faced in '79. Today's decisions will resonate just as long. Please help our manipulated electorate understand (as was done in '80 and beyind) that their families' and communities' long-term interests lie in sustainable, responsible enterprise and personal initiative.

Thank you for trying. The electorate must follow your lead. But someone has to lead.

Representative Ryan should become more familiar with the macro-details of Medicare, Medicaid and Social Security before he puts together his proposals. Medicare participants already have the "better off" households paying more for Medicare. My wife and I are "not rich," but we individually pay 2.5 times the base Medicare monthly premium for the same level of benefits. Do private sector and other public sector health care plans for retirees pay their level of premiums on the basis of the level of household income? The answer is no! Maybe, one of Representative Ryan's proposals will be to increase our monthly premiums to 5.0X the base premium. Representative Ryan should know what he is talking about before he opens his mouth and puts the proposals down on paper.

There was a deal for a clean CR between Boehner and Reid. Boehner reneged because the Tea Party yanked his chain.The Tea Party, by pressuring Boehner, caused the shutdown by forcing him to withdraw from a deal he had agreed to.End of story.

ABC News "This Week", Oct. 6, 2013: STEPHANOPOULOS: But Mr. Speaker, he says -- and he said it publicly on many occasions, that you came to him back in July and offered to pass a clean government funding resolution, no Obamacare amendments, that was $70 billion below what the Senate wanted. They accepted it. And now, you've reneged on that offer.

BOEHNER: No, clearly there was a conversation about doing this.

STEPHANOPOULOS: Several conversations.

BOEHNER: Several. But--

STEPHANOPOULOS: And you offered a clean resolution.

BOEHNER: But I and my members decided the threat of Obamacare and what was happening was so important that it was time for us to take a stand. And we took a stand.

The White House meeting on the budget and debt stalemate needs a solution that makes all sides look good. The $40 billion charitable deduction offers an opportunity to create more than a million new full and part time jobs by simply limiting the deduction to those charities willing to create new jobs. The jobs would pay a little below the private sector rates but could range from basic to professional - whatever each charity needed to expand services.

The Tea Party could claim that they did something to offset the job losses caused by the ACA.

The Democrats could point to a jobs program that will reduce Food Stamp spending.

The Republicans could point to a model program that creates jobs without raising taxes or increasing spending.

The President can speed up the economic recovery (without favoring union jobs).

Large donors will know their gift is putting people back to work and the service charities will expand their good deeds.

Koch Brothers are publicly bailing out on House Republicans, but they own the Tea Party and the Heritage Foundation / Jim DeMint. The cowards funded Ted Cruz's coming out party and now they are trying to bail.

KOCH BROTHERS CLAIM NO INVOLVEMENT IN EFFORTS TO DEFUND HEALTHCARE REFORMSBillionaire Brothers Who Bankroll Republican Causes Have Distanced Themselves From The Gop's High-Risk Shutdown Strategy 9 October 2013Charles and David Koch, the reticent billionaires who bankroll Republican causes and candidates, have distanced themselves from their favoured party's financial brinkmanship AS CORPORATE AMERICA REACTS WITH GROWING HORROR to the imminent prospect of a us debt default.

Money from Koch sources has supported many conservatives in Congress who have led the charge to shut down the government and breach an imminent debt limit if Barack Obama does not abandon his healthcare reforms.

But the brothers' privately held chemical conglomerate, Koch Industries, issued a rare public statement on Wednesday to deny allegations that the pair supported the high-risk strategy, and urged Congress to focus instead on balancing the budget.

A good leader is like a coach. He brings his 'team' together and works together to find solutions. He can be trusted, he doesn't worry who gets the credit, and he respects others opinions. I think Paul Ryan would make an excellent coach, leader, president.

October 08, 2013CONGRESS LOSING OUT TO ZOMBIES, WALL STREET, AND...HIPSTERS

There's been no shortage of polls out in the last few days showing that Congress has a poor approval rating and we'll add to the pile- we find that only 8% of voters approve of the job it's doing to 86% who disapprove.----Hemorrhoids, toenail fungus, dog poop, and cockroaches all might be a little bit gross- but they're all more popular than Congress. Hemorhoids beat out Congress 53/31 with bipartisan support. On the other three there's a partisan split- Republican voters go for Congress while Democrats take the alternative but overall it's a 47/40 victory for dog poop, a 44/41 one for toenail fungus, and a 44/42 triump for cockroaches. ---Alas the list of things voters like more than Congress is a longer one. Much derided mothers in law (64/20), public radio fundraising drives (60/25), and even Wall Street (46/15) all do better than Congress by at least a 30 point margin. It's also only appropriate for Halloween month that witches (46/32) and zombies (43/37) outpoll Congress as well.

Oct 7, 2013Seventy percent in a new ABC News/Washington Post poll disapprove of how the Republicans in Congress are handling the budget negotiations, up 7 percentage points from a week ago. Far fewer, 51 percent, disapprove of Obama’s approach, essentially unchanged in the past week.-------------

Congressional Republican disapproval up 7% in a week. Keep it up boys.

Paul Ryan and Romney...Ok, back to reality. I am a currently furloughed GS employee. I agree with all of Ryan's points and comments.Lets get back to work and make course corrections on the aircraft carrier. Sensible incremental changes.Obama needs to negotiate. Lets get a common ground and move fwd.

A Constitutional Amendment that would:- Require a minimum time of engrossment for each bill passed by Congress. During engrossment, the text of the bill is made public & at the end, may only be passed or rejected, without amendment. For emergency bills, a 2/3 majority in both houses would be required. T. Jefferson suggested a 1 year engrossment; Mark Levin, in his book "The Liberty Amendments" suggests 30 days. I'm somewhere between those, myself.- Provide automatic sunsetting of all Federal laws & de-authorizing of their associated regulations & bureaucracies, unless individually reauthorized (no omnibus re-up) by roll call vote. Levin's "The Liberty Amendments" includes such an Amendment. I would add, the sunsetting time should vary: 5 years for 50-59%; 8 years for 60-66%; 12 years for 67-74%; & 17 years for 75% & above.

I would only add : In raising revenues, and especially in reducing spending, we must not over-subsidize the elderly by over-taxing young adults with families; we absolutely must find ways to raise spending considerably on vital public goods for our long term future : education (in future all need a college degree or equivalent); infrastructure (we must go beyond just fixing all the worn out bridges and roads and build for the future); and basic research (the USA must stay at the forefront of bio-medical, energy, agricultural and other research areas) as a corner stone for US private competitive advantage. In short, we must spend to build the long-term future, not mostly to protect the past.

If you are one of the lucky "who can afford to pay far more than the current tax rates," put your money where your mouth is and pay more. Give up your deductions and exemptions and knock yourself out. Make a donation to the US Treasury even, but when people are paying more than 50% of their earnings in income and payroll taxes, higher tax rates are not the solution Cutting spending, particulary entitlements, through better management and reduction of fraud is a far better approach

If I spend less than I earn, as you say, the difference is my savings - to be set aside and invested for future needs such as education of my kids or retirement.

If I borrow through taking out a mortgage to buy my house, the key is I must be able to service the debt out of my future earnings. So long as I can, I will build a new asset for my family and for the US economy. In time, I will pay off the debt fully.

So, contrary to what you state, savings and debt are not the same thing.

Few people spend more than they earn. Most save in one form or another. Many take out loans (debt) to create new assets. This applies to businesses as well as individuals.

Debt is not per se bad. It is whether it is taken out on a sustainable basis. Properly done, debt management is vital to our economy - personal and collective.

Greg, while the ideology of a "balanced budget" is compelling, NO NATION can run the kind of Globalization we've designed, in the absence of sufficient Deficit Spending to compensate for the Dollars that leak out of the domestic Consumption-Sales-Profits cycle, of "Adam Smith capitalism" if you will.

"Balanced Budget" is like if you were head engineer of an electrical generation plant that used a unique kind of motor oil, but the company that has an EXCLUSIVE MONOPOLY on that oil decides to boycott your plant (for ideological or political reasons). Motors and gears WILL stop running, period. Dollars are America's economic lubricant.

Warren Mosler, who rose from a bank teller and loan desk guy to an international money speculator, pointed out that the Default on U.S. Treasury Bonds ("not paid on time" stunt) is NOT really the biggest problem we face.

The "cold turkey" shift towards a "Balanced Budget" will be not only devastating, but STUPID, a huge FAIL on understanding basic economic math.

A "Balanced Budget" by Congress would devastate the entire economy, not just "a few lazy people".

Our "Post-Industrial" nation and corporations still engage in massive IMPORTS also called a "Trade Deficit", by CHOICE.

That is, while we may concede that buying cheaper imports and remote foreign tech workers from Third World makes good economic sense for many individual businesses, a nation-state CANNOT financially entertain a Trade Deficit if the Govt does not run Budget Deficits that are sufficiently LARGE ENOUGH to match the "leakage" of the national currency to foreign accounts (even though those foreign accounts are really inside the Fed) .

Not unless we somehow engineer banks to run another unsustainable Housing Bubble for a while ... until THAT explodes again. (That's what QE was attempting to do, but the Fed cannot "push" bank lending on underwater properties.)

Large quantities of money going to domestic savings have the same effect on our domestic finances and economy as the Trade Deficit -- Dollars "leaking" out of the consumption-production cycle, which means business failures, unemployment, bankruptcies, even more bank failures needing more bailouts.

This is not a problem that can be fixed with merely "wage hikes" or "better education" or "less welfare". People saying that are displaying severe shortcomings in THEIR education.

This is about a mathematical financial issue, tracking the plus and minus flows of currency. This is about the relationship between the state issuer of the currency vs OBVIOUS conditions in the real economy -- globalization "free market" policies in place for decades.

Capitalists cannot "have their cake and eat it too", that is, they cannot keep the kind of globalization practices and policies they want WITH "fiscal conservatism" (causing a dollar shortage) by govt at the same time. That cake doesn't bake. It can only melt.

MMT is not at root a prescription, it starts out with an accurate description. 7DIF rocks.

Steve, While it may be desirable for social or political reasons that the Bush tax cuts should expire, tax hikes or spending cuts (which are functionally the same thing in a macro sense) (not necessarily so, distributionally), merely reduce the total of Net Financial Assets that exist as savings and as commercial flow in our domestic economy.

MMT has proposed the most MASSIVE TAX CUTS in history, especially at the bottom where we have a severe shortage of Aggregate Demand. That would be a total suspension of the hugely regressive Payroll Tax, at least until we reach full employment and full capacity of business, however we define that.

Sounds scary, right? How can Treasury add those special T-Bonds to an account (spreadsheet) on the Central Bank's computer if the IRS doesn't first confiscate the earnings of today's workers and employers? How indeed.

You can read even on the Soc Sec dot gov website a discussion between Luther Gulick and FDR on his flagship Social Security program. Gulick told FDR in 1941 that the Payroll Tax was a problem, and should be abolished, especially if another recession hit. FDR replied that Gulick's economics was correct. FDR said the only reason for putting in a Payroll Tax was to protect his program from people like Paul Ryan .... SERIOUSLY. Read it.

Soc Sec taxes on Payrolls was a political "ruse" by FDR to protect his program, NOT intended to be the real source of funds that might "run out".

If we have grown up since then, now we can see that Payroll taxes merely punish current workers and make them resent being taxed for the elderly ... in essence fiscal propaganda that exacerbates an angry "Generation Gap", for no sound fiscal reasons. The political outcome depends on if we see Soc Security as not merely good for ordinary citizens, but as CRITICAL to high levels of Consumption, Demand, and Profits.

Soc Sec not only drives consumption by the elderly (and sick), not only tamps down inevitable social unrest, it also drives higher consumption by current workers who don't have to desperately save (not spend) a huge portion of wages and/or salaries for UNKNOWABLE future conditions, like if they happen to be lucky enough to live too long.

(Note: Much of these savings will be stored in the form of safe T-Bonds, by IRA/401K pension funds and by banks, which therefore increases the "national debt" and also reduces Demand.)

In short, the Govt Deficit is NOT a problem. It's a NECESSITY (for reasons stated on other comments), because a Govt Deficit equals a Non-Govt Private Sector Surplus, and vice versa.

Not only is it true that 7DIF is right, Seven Deadly Innocent Frauds of Economic Policy, but Stephanie Kelton rocks too.

Our Govt, a sovereign issuer of a non-fixed, non-pegged, free-floating "virtualized" currency DOES NOT really BORROW in the sense we normally think, to cover spending obligations and decisions.

Other than the fact that Congress requires Treasury to hold Bond Auctions with select Primary Dealers, instead of Swapping Notes directly with the Central Bank (which is what is ultimately occurring), T-Notes Bonds Bills swapped for Federal Reserve Notes, the main purpose of selling T-Bonds into the banking system (outside of QE times) is to sop up excess surplus Reserve balances which would otherwise drive Interbank lending interest rates down to zero.

The "national debt" is a tool of monetary policy, NOT A SOURCE of Govt spending.The "national debt" is a SERVICE to the financial sector in general, to savers. Interest paid on the "national debt" is what makes it possible for banks to pay interest to depositors.

PD Banks, if they choose, are legally allowed by Congress to run an "overdraft" at the Fed, i.e. borrow, and then instantly "loan" that money to Treasury, for a nice safe risk-free profit. And yes, that equals an increase in the "national debt", because Banks stash funds in Securities accounts @ Fed when they buy T-Bonds for that cash. Yet what is ultimately different between a short-term T-Bond and a non-interest paying cash Dollar balance? Not much. Issued by different agencies of Govt. (ONE agency we count its Bonds as "national debt", the other we don't because it's not Congress doing the spending.)

In Australia a while back (Bill Mitchell), their "Wall St" held meetings to determine "how much 'debt' the Govt needs to issue while running a budget surplus" (with huge raw matl exports to China). WHAT?! Why would the govt need to issue ANY debt while running a budget surplus? High Street banks needed Govt Debt as a place to park savings and surplus reserves.

Govt spends by this method. Congress orders a payment, Treasury orders the Central Bank to route the payment to the recipient. Central Bank changes a number in the Reserve account of a bank, the bank changes a number in the checking account of the recipient. At that instant, a sum of money comes into existence, by keystrokes, and by certain "legal" rules that govern this process.

The instant a tax payment is cleared by the Central Bank, that sum of money is deleted back to whence it came, as the balance of the account is reduced. We can and do account for these payments in and out. We can get a sum that's called a "deficit" or "surplus". But IRS collections do not functionally serve as a SOURCE of Govt spending (since those Dollars ultimately arise out of the same place that letters and numbers go when you delete them or create them on your own computer).

MUCH more important, the situation we call a "govt budget deficit" (which is NOT constrained by anything, even per Greenspan to Ryan) equals a non-govt PRIVATE SECTOR SURPLUS, and vice versa. Who honestly believes the USA consumer/business economy will improve from having LESS MONEY?!!!

You cannot compare the poll numbers of the President, which is an individual, to an institution, which is Congress.

Try comparing the poll numbers of your President, which are poor, because he has been doing a bad job for five years, to an individual Congressman. I'll be that he does not beat even one in favorability. Or, compare the poll numbers of the federal government, which he is in complete control of; IRS, EPA, HSA, to Congress.

This is a stupid tactic that supporters try to justify the poor performance of a President that even they must admit, is a terrible leader.

It's pretty sad, if you google demonstrators you can clearly see that the tea party people look like, well, fairly calm. Then you have the pics of the left demonstrating and it looks like babies not getting their way at the toy store.

It is hard to create laws forcing people to act wisely, but one may try a few limiting damage from unwise actions. You have good ideas. By the way, putting expiration date on all laws also crossed my mind,

We may need even more. Now politicians are proud from resolving some problems by introducing new regulations. We need politicians being proud of resolving problems by eliminating existing laws and having nothing instead.

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